What are Fair Pay Agreements?

In the lead up to the election there has been some minor media commentary about Labour’s industrial relations policy. Business NZ has come out against Labour’s proposed “Fair Pay Agreements” (FPAs), and Jacinda Ardern was questioned on Labour Policy during the leader’s debate. What are these FPAs and should we support them?


“Fair Pay Agreements” – What are they?


Labour’s election manifesto has a brief outline:

“In conjunction with all relevant stakeholders, develop and introduce a legislative system of industry and sector collective bargaining that allows unions and employers, with the assistance of the Employment Relations Authority, to create Fair Pay Agreements that set minimum conditions, such as wages, allowances, weekend and night rates, hours of work and leave arrangements for workers across an industry based on the employment standards that apply in that industry.

This would be a significant change in NZ’s industrial relations system.

Currently employment agreements operate purely between an employer and an employee/union.  Government intervention is limited to mandating minimums for leave, holidays and the minimum wage. With low rates of union participation, this has generally left employers in a strong position. A FPA system would change this dynamic, by increasing the involvement of the government (through the Employment Relations Authority/ERA).

Negotiations would be expanded. Instead of an employer and employee/union negotiating in a single workplace, FPAs now involve employer groups, employees/unions and the ERA, and extend beyond individual workplaces to set rates of pay and conditions across whole industries.

The neo-liberal right and employers groups are freaking out at these proposed changes. While it’s a big change, it’s far from soviet inspired socialism. For most of NZ’s history there was an essentially similar system under the arbitration court. Examples aren’t limited to history. Australia maintains a system of industrial awards today. This doesn’t mean the end of capitalism, and can even be useful to some employers who don’t want to be undercut by more ruthless competitors.

Exactly how this process will work is not yet determined, but the outline is clear enough. For leftists and unionists there are some clear advantages, and also potential problems.




FPAs would likely have a number of important advantages for workers. Most importantly they would likely increase and protect workers wages.

FPA’s would increase the scope of union advocacy to the entire workforce. At present, many people work for small employers or as contractors, and can have limited access to any union protection. Even in heavily unionised industries, small sites and employers can exist which many unions find it uneconomical to include in organising plans. FPA’s will mean that all these workers will be covered a negotiated agreement, which will protect vulnerable workers.

Secondly, many workers could be better likely to get some gains out of negotiated FPAs rather than direct negotiations. Currently negotiations take place between employers and employees/unions. In many workplaces unions are weak or non existent, which leaves a power imbalance that suits employers. The FPA system adds the Employment Relations Authority as a third party. In the current context of low union density, a three way negotiation involving the ERA would probably be advantageous to employees. This is not a long term solution for the union movement. Unions need to seek to increase their strength. But in the medium term adding a third party that’s vulnerable to political pressure negotiations would likely give some relief for employees.

Finally, FPAs setting industry standards would help to remove an avenue for employers to attack pay and conditions through subcontracting, tendering or franchises. Currently, if workers have won increased pay and conditions through a union contract, there is an active incentive for employers to contract out those aspects of their business, to another business who will do it for less. Workers will continue to do the same work, but formally it will be under a new employer, and need to fight to regain their position. Even if a union can protect wages and conditions under a new subcontracting employer, as soon as that contract comes up for tender, the whole process repeats. Having an industry standard that is legally binding removes incentives for employers to contract out. This would remove an important tool employers use to attack wages.




While FPA’s have some significant advantages for working people, there are also potential problems and many of the challenges unions face would remain unresolved.

Most importantly, FPA’s could actually undermine union membership. FPA’s will increase coverage of union advocacy, but not necessarily increase union membership and organisation, and could actually create a disincentive for union membership.

Currently, union members are more likely to receive a pay increase than those who are ununionised, and many contracts include union only provisions, such as one off payments or extra leave. In short, workers currently are better off for being union members. That might not be the case for the new system. The key strength of the FPA system is that is universal, ie: all workers in an industry will receive it, irrespective of union membership. Why join your union if you get the same benefits as non union members?

The primary challenge for the union movement today is growth. Union density in the private sector has dropped to less than 10%- this trend needs to be reversed. FPAs will likely help improve wages, but not necessarily help build unions.

Given that the process for FPA negotiations is as yet unclear, there is a risk that they could be constructed in a way that reduces the capacity of working people to be involved in the negotiations directly. While current collective agreement negotiation processes are imperfect, the framework that exists has clear ways for shopfloor workers to be involved and have final say on whether an agreement is ratified. FPAs 3 party negotiations and industry wide coverage would likely move power away from workplaces. Instead lawyers representing unions, the government and employers define what workers deserve without their direct input. The space for working people to engage in their unions already often limited, and these changes could drive that process further, and again, this is a disincentive for people to join their unions as the space for their involvement could be further limited.

Finally, while FPAs would most likely strengthen working people’s wages, that’s not necessarily the case. They could be used to drive conditions down. It is unclear if these FPAs will be binding on unions as well as employers, and what workplace bargaining would remain. It is possible that these could put a downward pressure on the contracts of some workers who maintain strong Unions and have wages above industry standards. For example in the transport industry there are some well organised workplaces alongside others that have weak contracts. If FPA process are organised on the terms of the employers, it’s possible that this could be used to screw some wages down.  


What it means


While the details of FPA’s are yet to be determined, it is likely that these would both help strengthen workers wages, and make it harder for hostile employers. It is important for those on the left and unionists these changes, and politically defend them from attacks in the media and by right wing groups and politicians.

That being said, it will not be enough to accept any reform as a positive step. The Union movement needs to have a strategy of not just making these FPAs happen. It will be necessary not just to get Labour in power, but to push to ensure that tools for organising workers are included in any future FPA arrangement.

Central to this will means understanding that these agreements will not be a solution to all problems. The central challenge of the union movement- rebuilding our strength- will remain. Building unions, both in terms of membership and engagement, remains crucial whatever the legal framework we organise under. Whatever the future of industrial relations, rebuilding a movement of workplace activists is as important as ever.

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Leftwin seeks to host a discussion on building a new left politics in Aotearoa/New Zealand.
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